SolarCity Corp. would add more than a $500 million in cash to Tesla Motors Inc.'s balance sheet during the next three years if the two companies were to merge, the auto maker said.
The solar business would contribute more than $1 billion in revenue next year, Tesla said in a statement posted on its website Tuesday as part of Chief Executive Elon Musk's continued effort to persuade shareholders to accept the proposed merger.
SolarCity has been spending more than $200 million a quarter, while taking in less than that in revenue.
Shareholders of both companies are scheduled to vote on the tie-up on Nov. 17.
"By combining SolarCity with Tesla, we expect to significantly expand our total addressable market to include a solar market that generates $12 billion in the U.S. alone, and that is expected to grow at a compounded annual growth rate of between 15-20% in the next 5 years," Tesla said in the statement.
"Additionally, with the new products that we have shown, we expect that solar's share of the nation's $400 billion in annual retail electricity sales will increase more than anyone currently expects," the statement continued, referring to solar roof tiles shown by Tesla last week.
SolarCity increased its cash in the third quarter from the second quarter this year, the statement said. That includes a $305 million cash equity transaction last September with Quantum Strategic Partners Ltd., the hedge fund of billionaire investor George Soros.
SolarCity leases many of the rooftop solar panels it installs on homes and receives monthly payments from those customers in return.Such contracts will generate $8 billion over the next 20 years, Tesla said.
"As SolarCity further shifts its product mix to cash sales and loans, it will further increase the upfront cash generation of new installations and expects to increase its cash balance even more in Q4 2016," Tesla said.
In addition, Tesla said the companies planned to accelerate SolarCity's cost-cutting as part of "strict cost discipline."
Mr. Musk, who is chairman of both companies, has been making the case since summer for accelerating his vision of an auto maker that sells a suite of products to enable sustainable car ownership, including solar panels that collect energy, wall-mounted battery packs that store it, and electric vehicles fueled by it. Mr. Musk also is laying the groundwork for cars that drive themselves and could be rented out to make money when not in use by the owner.
Mr. Musk on Friday demonstrated glass-tile solar panels that look like traditional roofing materials. The tiles would cost less than a conventional roof plus electricity, he said. He didn't announce when they would be available for sale.
The statement outlining the financial impact of a Tesla-SolarCity merger followed Tesla's announcement last week of its first quarterly profit in three years, buoyed by record sales and reduced manufacturing costs along with the sale of Zero Emission Vehicle credits to other auto makers. Mr. Musk said Tesla is on track for another profitable quarter on adjusted basis in the current quarter ending in December.
Tesla is preparing to ramp up assembly of the forthcoming Model 3 sedan, a vehicle Mr. Musk said he believes will take the company's production to 500,000 vehicles in 2018 from about 50,000 last year. He is on track to produce about 80,000 vehicles this year, Mr. Musk said last week.
Write to Tim Higgins at Tim.Higgins@WSJ.com and Cassandra Sweet at firstname.lastname@example.org
(END) Dow Jones Newswires
November 01, 2016 18:45 ET (22:45 GMT)
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